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Washington – Independent Contractor Created Nexus for Out-of-State Business

SALT Report 1787 – The Washington Department of Revenue ruled that an out-of-state continuing education provider who used independent contractors to present information at live seminars had nexus with Washington and was subject to B&O tax.

The Taxpayer does not have any employees in Washington but rather, contacts potential speakers in the state, asking if they would volunteer to speak at an upcoming seminar for a nominal fee. The speakers agree to volunteer because they are given the opportunity to market themselves as an expert in a particular field and generate potential business from those attending the seminars.

The Department determined that the independent contractors were representative third parties as defined in WAC 458-20-194, which states that a “representative third party” includes an agent, independent contractor, or other representative of the Taxpayer who provides services on behalf of the Taxpayer directly to customers.

Therefore, it was determined that the independent contractors who made presentations at the live seminars were providing services on behalf of the Taxpayer and directly to the Taxpayer’s customers. As a result, the Department ruled that the Taxpayer was engaged in business in Washington through its independent contractor representatives, had nexus in the state, and was liable for B&O taxes.